Early childhood education and care

Early childhood education and care (ECEC) services are places where children play, form relationships, use their imagination and learn. For many young children and their families, ECEC is a part of everyday life. Nearly half of one-year-olds attend some form of ECEC, and about 90% of four-year-olds are enrolled in ECEC. For many children – especially those experiencing disadvantage and vulnerability – attending ECEC can have positive effects on their achievements at school and later in life. But children who would likely benefit the most from ECEC are attending less than average or not at all.

ECEC is critical to the wellbeing of families. Many families rely on ECEC services, or on a combination of formal and informal care, to participate in the labour force, access study and training opportunities, or volunteer. Over the years, governments have introduced many policies to support ECEC, in recognition of the vital importance of the early years (as articulated in the Alice Springs (Mparntwe) Education Declaration) as well as the role of ECEC in enabling labour force participation, particularly for women.

As a result of these policies and the expansion of largely for-profit provision, the number of ECEC services has increased over the decade to 2023 by 25% to 18,500 services; the number of places available to children has risen by nearly 50% over the same period, to more than one million places. Further expansion is expected with recent subsidy increases and state and territory governments’ plans to expand their preschool offering. But ECEC availability varies across the country – some areas have many services, while others have very few. A higher proportion of services meet or exceed the National Quality Standard than ever before, but services in disadvantaged communities are often of poorer quality.

Without diminishing the importance of female labour force participation, this inquiry centres children in ECEC policy – understanding what aspects of ECEC make a difference to children, how services can be inclusive for all children, and how governments can ensure that their investments in ECEC support better outcomes for children. Families are a critical influence on children; parents and guardians will ultimately decide if and how much ECEC children attend. Policies to improve the accessibility and affordability of ECEC are about supporting children’s development and family choices.

There are many reasons why children who stand to benefit significantly from ECEC attendance are missing out: there may be insufficient services in their local area; where services exist, they may have substantial waiting lists or limited places due to workforce constraints, or out-of-pocket fees may be unaffordable; services may not be inclusive or culturally safe for children to attend. Aboriginal and Torres Strait Islander children are more likely than their peers to miss out on ECEC.

The terms of reference for this inquiry require the Commission to consider a ‘universal’ ECEC system. Reflecting on those children who are unable to access ECEC, the Commission considers a universal system would enable all children to access services that support their development by addressing current availability gaps. In the Commission’s assessment, such a system would enable all children to access three days, up to 30 hours, a week of affordable, high quality ECEC regardless of their parents’ activity status. This would also continue to support mothers’ (or secondary income earners’ within a couple) choices about paid or unpaid work, study or volunteering. Children and families who require additional hours would continue to be able to access them.

Universal access will require further expansion of services, with a commensurate increase in the availability of a qualified, appropriately remunerated and supported educator and teacher workforce. Universal, however, does not mean uniform. In a universal system, some form of ECEC would be available to all children regardless of where they live, but the mode of provision could differ depending on location and the needs of children. Nor does universal access mean compulsory, full-time or fully subsidised access.

Achieving universal access will take time. As a priority, governments should address affordability and availability gaps for those least able to afford ECEC or who can only access few, if any, services. Governments should also improve support for services to ensure a system that is inclusive, flexible and well-coordinated. The draft recommendations in this report span:

• availability – considering ways to make services available in areas of low supply, while ensuring that services offered exceed or at least meet quality standards. Governments are already investing in boosting the supply of ECEC but need to do more to ensure universal access. The regulatory system needs sufficient resources to monitor and enhance quality across ECEC services
• affordability – addressing concerns about inequities and lack of flexibility in the current subsidy structure, relaxing the activity test embedded in the Child Care Subsidy (CCS) to support universal access to ECEC, and increasing subsidy rates to low income families, so that ECEC is free or very low cost for those eligible
• inclusivity – ensuring that services are truly inclusive for all children. The programs intended to support inclusion reach only a fraction of the children who need them, and this needs to be addressed
• flexibility – supporting services to be more responsive to the needs of families, including investigating ways to reduce the proportion of hours that families (and taxpayers) are required to pay for even if children do not attend; removing restrictions around the provision of extended care in preschool; and ensuring that primary schools enable the provision of outside school hours care, wherever this is necessary.

The Commission estimates that relaxing the activity test for all families and increasing subsidy rates for low income families will lead to an increase of 12% in the hours of ECEC children attend, with about two-thirds of the increase in hours attributed to families who were not previously using ECEC. These reforms are also estimated to lead to a 3.4% increase in total hours worked (equivalent to 20,700 full-time employees) by single parents and secondary earners in couple families with young children. The total cost of the policy is estimated to be about $2.5 billion per year, about a 20% increase in the estimated CCS outlay for 2023-24.

Universal access to ECEC cannot be achieved without addressing the critical demand and need for educators, early childhood teachers, centre directors and other ECEC workers. Concerns about pay, conditions, career opportunities and qualification pathways for the ECEC workforce have been a major concern for the sector for many years. Processes to address pay and conditions in the sector are underway as a result of recent changes to the Fair Work Act 2009 (Cth). In addition, ensuring career and qualification pathways needs are addressed must be a priority before other changes in the sector can be realised.

Achieving universal access to ECEC will require staged and coordinated implementation of reforms to maintain quality and avoid bottlenecks that exacerbate unmet demand. The planned expansion of preschool in a number of states and territories will also affect universal access and further increase the demand for staff.

Expanding access to ECEC and preschool would be well served by governments entering into a new National Partnership Agreement for Early Childhood Education and Care. This would help coordinate efforts towards better stewardship, governance and consistency of ECEC services. The implementation of this Agreement should be overseen by a new ECEC Commission, which would play a pivotal role in developing priorities for investment and planning so that expanded ECEC focuses on areas of greatest need and is achieved at a sustainable pace. The proposed ECEC Commission could also monitor and evaluate the costs and benefits of reforms implemented. Evaluations – and a clearly articulated research agenda – would inform further policies to deliver affordable ECEC.

As progress is made towards universal ECEC by addressing the immediate policy priorities, governments could consider the merits of undertaking comprehensive funding reform, such as offering a flat rate subsidy to all families or funding ECEC in the same way schools are funded. Some implications of these approaches are explored in this report. For example, preliminary modelling shows that moving to a 90% subsidy rate for all families would increase total hours of work by single parents and secondary earners in couple families with young children by 2.8% (or the equivalent of 17,000 full‑time workers). Hours of ECEC are estimated to increase by 7.4% and fiscal costs would rise by $4.1 billion a year (or about one third). Income tax collections would grow by $480 million.

The main beneficiaries from a 90% subsidy rate would be higher income families, as many low income families already receive subsidies at 90% or higher rates. The Commission will conduct further modelling and analysis of alternative funding options for the inquiry’s final report.

The Commission invites feedback from sector participants and the broader community on the policy options included in this draft report. We are also undertaking separate processes to hear directly from children about what they value in ECEC services and what changes they would like to see. Their views, alongside submissions and public hearings, will inform the Commission’s final report, which will be handed to the Australian Government in June 2024.

• Supplementary paper 1: Children’s outcomes (PDF 431 KB)
• Supplementary paper 1: Children’s outcomes (Word 132 KB)

• Supplementary paper 2: How do ECEC services support children? (PDF 486 KB)
• Supplementary paper 2: How do ECEC services support children? (Word 230 KB)

• Supplementary paper 3: The ECEC workforce (PDF 802 KB)
• Supplementary paper 3: The ECEC workforce (Word 385 KB)

• Supplementary paper 4: ECEC and labour force participation (PDF 629 KB)
• Supplementary paper 4: ECEC and labour force participation (Word 425 KB)

• Supplementary paper 5: Availability of ECEC (PDF 4.4 MB)
• Supplementary paper 5: Availability of ECEC (Word 4.5 MB)

• Supplementary paper 6: ECEC affordability (PDF 560 KB)
• Supplementary paper 6: ECEC affordability (Word 293 KB)

• Supplementary paper 7: Other barriers to access (PDF 511 KB)
• Supplementary paper 7: Other barriers to access (Word 185 KB)

• Supplementary paper 8: Regulating for quality (PDF 406 KB)
• Supplementary paper 8: Regulating for quality (Word 158 KB)

• Supplementary paper 9: Funding, governance and stewardship (PDF 441 KB)
• Supplementary paper 9: Funding, governance and stewardship (Word 211 KB)

A path to universal early childhood education and care

The Australian Government should lead a coordinated effort to give every child access to three days a week of high-quality early childhood education and care, according to a Productivity Commission report.

The draft report into Early Childhood Education and Care (ECEC) finds that many families are struggling to access services due to poor availability, high out-of-pocket expenses and a lack of flexibility and inclusivity. Addressing these issues would have significant benefits for children and for women’s labour force participation.

“Vulnerable and disadvantaged children benefit the most from quality early childhood education and care, but they are currently the least likely to attend,” said Associate Commissioner Deborah Brennan.

The report recommends that the Australian Government facilitates the provision of services in markets where ECEC providers are unlikely to invest.

“Some areas of Australia have few or no early childhood education and care services. More funding will be needed to address these persistent service gaps,” said Commissioner Lisa Gropp.

The report also recommends increasing the Child Care Subsidy rate to 100% for lower income families and relaxing the activity test.

“A child’s entitlement to at least three days of ECEC a week should not depend on how much their parents work,” said Associate Commissioner Brennan.

“Providing further support for lower‑income families will ensure that cost does not prevent children from accessing education and care.”

The Commission found that many ECEC services are not inclusive or flexible enough to meet the needs of children and families.

“The system can only be universal if every child is welcome. The Australian Government should increase funding to enable the inclusion of all children regardless of their ability or cultural background,” said Commissioner Martin Stokie.

“Governments and ECEC services also need to do more to achieve the commitments in the Closing the Gap Agreement for Aboriginal and Torres Strait Islander children. That means working towards a sustainable funding model for Aboriginal Community Controlled Organisations and investing in the cultural capability of the sector.”

The report highlights the considerable and persistent workforce challenges in the sector and makes several recommendations.

“We will not make any progress towards a universal system without addressing the sector’s workforce challenges. Improving pay and conditions is critical but more can be done to improve career and qualification pathways for ECEC professions,” said Commissioner Stokie.

“A high-quality universal ECEC system is within reach. Our draft recommendations would establish strong foundations for all Australian children and expand choices for women,” said Commissioner Gropp.

Media requests

02 6240 3330 / media@pc.gov.au

• Early childhood education and care (ECEC) services play a major role in the lives of young children and their families. Nearly half of one-year-olds attend some form of ECEC, and about 90% of four-year-olds are enrolled in ECEC. For many children, attending ECEC can have positive effects on their achievements at school and later in life. But children experiencing disadvantage and vulnerability – who are likely to benefit most from ECEC services – are less likely to attend.
• A universal ECEC system means making quality services accessible to all children and families. Achieving it will require tackling availability, affordability and inclusion gaps.
• Up to 30 hours or three days a week of quality ECEC should be available to all children aged 0–5 years.
  • Supply will respond in many areas to deliver this benchmark. But in persistent ‘thin’ markets or communities with complex needs, the Australian Government should provide additional funding to support the establishment of appropriate services and, where necessary, ensure their ongoing viability through block funding.
• Expanding the availability of ECEC will require governments to prioritise the workforce challenges facing the sector. The pay and conditions offered to the ECEC workforce – which are critical for recruitment and retention – may be improved through processes arising out of recent changes to the Fair Work Act. But more work is required to improve career and qualification pathways within and into ECEC professions.
  • ECEC educators who are studying to become teachers should be offered accelerated pathways and greater flexibility to complete their qualifications while working.
  • Early childhood teachers who hold degree-level qualifications approved by the Australian Children’s Education & Care Quality Authority should be eligible for teacher registration in all states and territories.
• Affordability should not be a barrier to ECEC access. Lower income families spend a higher proportion of their income on ECEC compared with those who are better off. The Australian Government should raise the maximum rate of the Child Care Subsidy (CCS) to 100% of the hourly rate cap for families on incomes up to $80,000 – about 30% of all families with young children.
  • The CCS activity test should be relaxed so that it is not a barrier for any family wishing to access up to 30 hours or three days a week of ECEC services.
  • Preliminary modelling shows that increasing the top subsidy rate to 100% for lower income families and relaxing the activity test will lead to an estimated 3.4% increase in total hours worked (equivalent to 20,700 full-time employees) by single parents and mothers (or secondary income earners) in couple families with young children. Total hours of formal ECEC used are estimated to rise by about 12%, with about two‑thirds of the increase attributed to families who were not previously using ECEC. The total cost of this policy is estimated to be about $2.5 billion per year, equivalent to a 20% increase in the total estimated CCS outlay for 2023‑24.
• ECEC services should be inclusive of all children, including those with disability and those from diverse cultural backgrounds. But current government supports fail to reach many children who require them. The Australian Government should significantly increase funding for the Inclusion Support Program and streamline the requirements of the program to expand its reach.
• Aboriginal and Torres Strait Islander children are under-represented in ECEC services because mainstream providers are not always available and affordable, or they may not offer culturally safe environments. Aboriginal Community Controlled Organisations (ACCOs) can struggle to source adequate funding to deliver tailored programs that meet community priorities.
  • ACCOs require a sustainable funding model, which recognises their knowledges and expertise to deliver the ECEC priorities of their communities.
  • The cultural capability of all ECEC services should be improved through publicly funded professional development for staff and better support for services.
• ECEC services should be flexible and responsive to the needs of families. Governments should remove impediments to the provision of flexible services, such as wrap-around care in dedicated preschools, and improve incentives for services to operate during non-standard hours. The Australian Government should fund supports for families experiencing significant barriers to access, such as lack of transport.
• Quality is paramount to achieving the benefits of ECEC – but the regulatory system that is part of the National Quality Framework is not always resourced to deliver timely assessments of service quality or take sufficient action to tackle persistently poor quality.
  • The operation of state and territory regulatory authorities should be independently reviewed, and where necessary, the Australian Government should fund an increase in resourcing to enable regulatory authorities to deliver timely quality assessments and support continuous quality improvement.
• Australian, state and territory governments should sign a new National Partnership Agreement on Early Childhood Education and Care, which would outline their respective roles and responsibilities as stewards of the system, as well as the objectives all governments seek to achieve in ECEC.
  • The Australian Government should retain its responsibility for funding, including subsidies for families and direct support to establish services in areas of low supply. State and territory governments should retain their responsibility for preschool.
  • State and territory governments should be responsible for ensuring the provision of outside school hours care in government primary schools, with ongoing financial support from the Australian Government.
• A new independent Early Childhood Education and Care Commission should be created to support, advise and monitor governments’ progress towards universal access to ECEC.
  • The Commission should evaluate the effects that policy changes have on children, families, educators, teachers and service providers – to ensure that services offer inclusive, quality ECEC in all communities.
  • The Early Childhood Education and Care Commission should implement a comprehensive research agenda to address some of the significant knowledge gaps around the factors that affect ECEC quality and their implications for children.
• The reform agenda outlined in this report sets out a pathway to a universal system of ECEC. Delivering it will require careful implementation and sequencing. Addressing workforce issues will be fundamental to achieving universal availability.
  Other broader funding options canvassed in this report could be considered once the suite of proposed reforms have been implemented.

Printed copies of this report can be purchased from Canprint Communications.

• Draft report post-release briefing webinar transcript (PDF 195 KB)
• Draft report post-release briefing webinar transcript (Word 303 KB)